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Level 1
August 27, 2020
Question

Under the CARES Act, if I use a portion of my qualified 401k withdrawal to pay an pre existing 401k loan, does that qualify as a partial repayment contribution of this special withdrawal?

  • August 27, 2020
  • 4 replies
  • 14 views
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4 replies

macuser_22
Alumni - Champ
Alumni - Champ
August 27, 2020

No.  And you must be qualified to take a distributiin under the CARES act at all.

 

See Q3:

https://www.irs.gov/newsroom/coronavirus-related-relief-for-retirement-plans-and-iras-questions-and-answers

 

Q3. Am I a qualified individual for purposes of section 2202 of the CARES Act?

A3. You are a qualified individual if –

  • You are diagnosed with the virus SARS-CoV-2 or with coronavirus disease 2019 (COVID-19) by a test approved by the Centers for Disease Control and Prevention;
  • Your spouse or dependent is diagnosed with SARS-CoV-2 or with COVID-19 by a test approved by the Centers for Disease Control and Prevention;
  • You experience adverse financial consequences as a result of being quarantined, being furloughed or laid off, or having work hours reduced due to SARS-CoV-2 or COVID-19;
  • You experience adverse financial consequences as a result of being unable to work due to lack of child care due to SARS-CoV-2 or COVID-19; or
  • You experience adverse financial consequences as a result of closing or reducing hours of a business that you own or operate due to SARS-CoV-2 or COVID-19.

Under section 2202 of the CARES Act, the Treasury Department and the IRS may issue guidance that expands the list of factors taken into account to determine whether an individual is a qualified individual as a result of experiencing adverse financial consequences. The Treasury Department and the IRS have received and are reviewing comments from the public requesting that the list of factors be expanded.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
Critter-3
Level 15
August 30, 2020

Personally if you are allowed by the employer to take a distribution from the 401K  then what you use it for is immaterial including paying off any kind of loan. This would be no difference than paying off a car or mortgage.